The $15 million factory in Hautapu, New Zeland, features cutting-edge milk protein fractionation technology, which will be used initially for extracting lactoferrin, a high value component of milk that Fonterra claims has an important role in boosting the body's immunity.
The total global market for lactoferrin is about 90 metric tonnes a year, with a selling price of US$300 a kilogram or more. About 80 per cent of market consumption is in Japan, followed by Korea with 14 per cent. Fonterra will initially launch the product in these two markets.
"Lactoferrin will be to the dairy industry what aspirin has been to the pharmaceutical industry," said Fonterra's head of health & nutrition Patrick Geals.
"Research shows that it is the body's first line of defence against infections, it boosts the immune system and may have useful properties in the treatment of some tumours."
The opening of the plant is therefore an important statement by Fonterra that there is great potential at the high-value end of the dairy industry. Indeed, Fonterra hopes that the extraction of lactoferrin will be just the first step in developing the group's ability to extract bioactives.
Bioactives are high value, minute components of milk, and have been identified as a major driver of Fonterra's value-add ingredients business in a number of key markets.
"The really exciting thing is that we will be able to use this technology to extract other target protein fractions or bioactives," said Fonterra project manager Rob Boswell.
"The Hautapu facility provides a pipeline for future value-add, innovative speciality milk products and commercialisation of these."
Lactoferrin is in demand because of its nutritional and immune-enhancing properties as an ingredient in a range of products. These include infant formula, yoghurts, and speciality nutritional formulations. It can even be used as an additive in fresh milk to extend shelf life.
While the precise biological role for lactoferrin has yet to be fully established, Geals said the single whey protein, found in the milk of most mammals, is the subject of intense scientific focus.
"There have been six global conferences solely dedicated to lactoferrin since 1992 to try to determine its biological roles or functions. This shows the extent of global interest and its importance," he said.
Unlike commodity dairy products, annual production of lactoferrin and other bioactives is measured in kilograms, not metric tonnes.
"Lactoferrin is a very active protein fraction of milk, which is low volume but high value. It comprises only two hundredths of a percent of milk volume and is used as an ingredient in consumer products in minute quantities," said Boswell.
Fonterra's health & nutrition division, a leader in the development of bioactive ingredients from milk, is one of the company's five value added, speciality ingredient businesses. Another, fresh dairy solutions, based in Mexico and Europe, is developing protein-based solutions for chilled dairy applications such as yoghurts and fresh, soft cheeses.
DairiConcepts, a joint venture with Dairy Farmers of America, is leveraging Fonterra's cheese flavour technologies to focus on the huge United States convenience foods market. Milk protein concentrate, manufactured at DairiConcepts' Portales plant in New Mexico, is used as a base for a wide range of products, enabling cost-effective manufacture of more product from the same volume of milk.
Such activity suggests that the valued-added dairy industry has room for further innovation and growth. Together these businesses are achieving target growth rates of 12 per cent a year, generating revenue of $500 million in the last financial year.